The Smartphone Wars: Nokia’s fallback?

It’s unclear what, if anything, this means. If Nokia’s management were sane and competent, it would be easy to conjecture that they’re preparing a fallback strategy in case WP7 continues to bomb. But it would be pretty difficult to sustain any theory that Nokia’s management is sane and competent on the facts of the last two years.

And it’s just gotten more difficult, since the CEO of Nokia has announced that he will kill Meego on the N9 even if it’s successful! Which of course guarantees that nobody will buy the soon-to-be-orphaned N9, creating a self-fulfilling prophecy.

Good Goddess…after his one moment of insight as he wrote the burning platform memo it it has come to look as though Stephen Elop is so utterly incompetent that he couldn’t organize an orgy in a whorehouse. He’s just gone from mere strategic stupidity to active sabotage of his own company.

This is really sad. Call me sentimental, but I mourn the Nokia that did a fine job of flooding the world with cheap, well-designed cellphones back in the 1990s. The only good thing about this stumbling, shambolic finish is that the Nokia/Windows alliance probably completely scuppers Microsoft’s already miniscule chances of getting any traction in the smartphone market.

140 thoughts on “The Smartphone Wars: Nokia’s fallback?”

Remember when Nokia was a powerhouse, and Microsoft was an unstoppable monopolistic beast of a company? Nokia’s decline is sad, but the process at work now, of a competitive market disrupting large companies’ seemingly-unassailable dominance, is very pleasant to watch.

Remember when Nokia was a powerhouse, and Microsoft was an unstoppable monopolistic beast of a company? Nokia’s decline is sad, but the process at work now, of a competitive market disrupting large companies’ seemingly-unassailable dominance, is very pleasant to watch.

> But it would be pretty difficult to sustain any theory that Nokia’s management is sane and competent on the facts of the last two years.

They’ve had a pretty impressive number of people at the top leave over the past year. The recent departure of CTO Green was allegedly over the fate of MeeGo, executive VP Anssi Vanjoki left in disagreement over the hiring of Elop etc. etc. I suppose the people who couldn’t get behind Elop’s WP7 plan departed and left quite the chaos behind them, in an already indecisive organization.

In the light of the Android rumor, the eagerness to kill MeeGo kinda looks like someone trying to make sure that when everything fails, MeeGo can’t be the plan B instead of Android and cause yet another delay.

Sure, commoditization is hell, but the answer is seldom to go off and build your own copy of exactly that thing that has been commoditized, unless you’re willing to directly participate in the further commoditization. With open source, building your own copy is even less likely to be the correct answer. With non-viral open source that works reasonably well (like Android), it’s highly unlikely to be the correct answer.

No, to the extent that you don’t already have your own viable ecosystem (like Apple), the trick to dealing with commoditization is to (a) pick a platform that is cheap and ubiquitous and supported and under active development, and likely to remain so, and (b) add your differentiating sauce on top of that.

Hundreds of thousands know this implicitly and use Apache, Python, Linux, etc. in this fashion.

Samsung has historically hedged their bets on multiple phone operating systems, including their own in-house offering. But they seem to be concentrating on Android more heavily now. Imagine what they can do with all their hardware designers and software designers all differentiating on top of the Android platform, without having to reinvent basic stuff. That 12MP camera from 2 years ago would look a lot sexier with the entire Android marketplace and UI underneath.

We have to remember that Android was available in the US early on. Looking at the comscore numbers, Europe started up the hockey stick a bit after us. Now the rest of the world is following. Apparently, in the Philippines, Android usage grew 105% in the last 3 months.

And Samsung is well-positioned to participate in the growth of Android. So well positioned that there is some analyst speculation that Samsung might pass Apple to be the biggest smartphone vendor by the end of the year, maybe as early as the current quarter.

Patrick, isn’t differentiation closely tied to fragmentation? If (say) Samsung does something special with Android, won’t that inevitably mean that Samsung Android is to some degree incompatible with everyone else’s version?

Sure, lots of people use Apache and Python and Linux, but these are not mass-market consumer goods that tens of millions buy at retail. (Perhaps Linux is in some ways, but not in the ways I mean.) To the extent most smartphone buyers think of these things at all, they’re likely to think “iPhone” or “Android” or just “this phone that’s like an iPhone but costs less.” I suppose it’s possible that there could be mass excitement about “Samsung’s version of Android” because it’s different from all the other Androids, but it seems unlikely to me, and problematic from the point of view of the Android developer and the platform as a whole.

No quite. The presence of open standards, most importantly AJAX, prevents them from gaining the lock-in fast enough to be the new Microsoft. It would probably be sufficient to cripple web technologies enough to prevent web apps from being invented to envisage an alternative reality in which Apple did achieve Microsoft level dominance. Native apps would be so much more important in this scenario.

Patrick, isn’t differentiation closely tied to fragmentation? If (say) Samsung does something special with Android, won’t that inevitably mean that Samsung Android is to some degree incompatible with everyone else’s version?

While it’s certainly possible for differentiation to mean “fragmentation”, it’s not strictly necessary, unless you have an overly-broad definition of fragmentation.

If my Android phone makes better pictures than your Android phone because I have the Samsung 12 MPixel camera, my phone is not fungible with yours (for some uses), but I fail to see how this becomes “problematic from the point of view of the Android developer and the platform as a whole.”

Likewise, if Samsung builds a killer photo-editing application that’s only available on their phones, that doesn’t become “problematic for the platform.” And especially not for any developer (maybe even Samsung themselves) who’s smart enough to clone it and sell it for other smartphones.

To the extent most smartphone buyers think of these things at all, they’re likely to think “iPhone” or “Android” or just “this phone that’s like an iPhone but costs less.”

Your assumption of mass ignorance on the point of smartphone purchasers, and your continued assumption of iPhone’s inherent superiority for all purposes, are both unwarranted and unsupported.

I suppose it’s possible that there could be mass excitement about “Samsung’s version of Android”…

Don’t be silly. Samsung is not selling Android. They are selling phones. To the extent that Android is a feature the customers want (which it increasingly is), they will use Android as a selling point. To the extent that they can come up with other features that customers want, such as 12 MP cameras or photo-editing apps, or even extensions to Android that make certain things easy, they will.

But the network effects of Android increasingly insure that they won’t destroy the basic Android experience. Even the loading of crapware seems to be abating somewhat. The market is growing quickly, it is much more important to try to entice new customers than to lock in current ones, and despite your unwarranted assumptions, word gets around quickly about which vendors are abusing their customers by not offering upgrades, by adding uninstallable crapware, etc.

(a) Tablets are going to become a lot cheaper to make;
(b) Margins for tablets and cellphones are going to be dropping; and
(c) It will probably take Apple a long time (a year) to drop price if they are going to do that.

Two other interesting tidbits in that last article:

(1) “Apple drastically cut the iPhone 3G’s price when the iPhone 3GS arrived, but nobody was interested.” Perhaps it will be difficult for Apple to transition to multiple SKUs, if all their customers expect they are going to get the best that Apple has to offer. Being known for a lack of differentiation has got to suck if it’s time to differentiate.

(2) “Samsung is about to switch on fab 5,” its fifth-generation fabrication facility for manufacturing LCD screens, Windsor said. “The screen’s going to get an awful lot cheaper to make.”

A search for Samsung’s new fab 5 reveals even more information from the same analyst:

As for the other tablets, Windsor sees cutthroat competition, saying of tablets, “This could become the fastest-commoditized market in history,” Looking at the market for another popular consumer electronics product, blu-ray players, which dropped from about $500 to $99 in about 3 years, with little feature set or quality differentiation, that is really saying something.

If (say) Samsung does something special with Android, won’t that inevitably mean that Samsung Android is to some degree incompatible with everyone else’s version?

If the “something special” means that some apps will run on Samsung Android but not on other Androids, then it’s fragmentation. If the “something special” is just higher resolution camera(s), it’s hard to imagine an Android app that can’t work with the files those cameras produce, so no fragmentation.

Those assumptions would be “unwarranted and unsupported” if I made them, but I don’t. I do think the iPhone has an impressive mindshare, and that many people are simply buying their first smartphone, not based on brand or OS but on what they find in the store when they get it.

I think you’re right that differentiation doesn’t have to mean fragmentation, but it’ll be hard to entirely avoid.

Assuming a display size of 4″ (like the 4G Nexus S) in a 16×9 aspect ratio, approximately 2″ x 3.5″, that’s 7 sq” per phone. Ignoring wastage, around 460 phones per panel. At the projected run rate for the first phase of 24K panels/month, this new fab will start off producing enough panels for 11 million AMOLED cellphones per month, or 1.7M 10″ tablets per month, or some mix.

The investorvillage article says they will double production by the end of 2011, and double it again in the first half of 2012.

“in case WP7 continues to be a drug on the market. ” – I assume a depressant and not a stimulant. And not addictive.

Actually this is the first time in memory I was excited about something out of M$FT. Apparenlty win8 will use HTML5 and javascript. If they don’t do their usual proprietary pollution, it might be something useful. That is Win8, not WP8, but…

The N9 (or N950) would be great if it would dual or tri-boot.

And for me it is hardly nostalga. My N810 Wimax (originally because of the Harley Davidson color theme) finally finds Wimax, I was watching flash video 3 years ago and doing the rest.

In the light of the Android rumor, the eagerness to kill MeeGo kinda looks like someone trying to make sure that when everything fails, MeeGo can’t be the plan B instead of Android and cause yet another delay.

That almost presumes that Elop is both competent and working in Nokia’s best interest.

Maybe it’s the other way around. Maybe as soon as Elop made his announcement, somebody saner who cared said “uh-oh! If we’re going to be able to ship any of these things to open-source-loving MeeGo customers, we need to make sure that those customers at least can have a hope of the thing not being a paperweight in a year. If we show them Android screenshots, that might help to ameliorate the damage.”

It scares me to say this, but I’m not ready to presume Elop crazy, incompetent or a mole just yet. The NoWin alliance is in a unique market position. They have presumptive credibility because of their pedigree (Nokia in hardware and Microsoft in software). At the same time, WP7 has been a failure and Symbian is dying, so both Microsoft or Nokia have nothing to lose (and owe nothing to the carriers). In fact, given their history they both have significant incentives to route around them in the US (Nokia hasn’t had good relationships for a long time, if ever and Microsoft now sees carriers actively steering customers away from WP7 in stores).

To put this another way: What do you think Microsoft + Nokia + Skype + desperation equals? I think NoWin is backed into a corner and has no reasonable choice except to let the long-awaited “dumb bits” phone loose. Assuming competent leadership and reasonable execution (both big assumptions, I grant), watch out.

Even if Elop isn’t crazy, Microsoft’s not on the same page. The carriers hate Skype more than just about anything else. Not just the US carriers. All carriers. They know disintermediation is coming, but they have to slow it down to try to recoup as much capital investment as possible. Trying to be politically correct, in 2009 AT&T spokesman Mark Siegel said:

We don’t prohibit Skype calls on our network, but we think it’s only reasonable that our vendors won’t facilitate competitive services that run on our network.

So what about a wannabe vendor that went out and bought Skype?

Unless… Microsoft ports Skype to every phone except theirs? Or better yet, maybe just “Nice international long distance business ya got there. It’d be a real shame to see it replaced with data…”

Of course, the carriers could extremely easily mess with the data stream timing just enough to really screw up realtime voice, but not bother buffered A/V playback. Microsoft might be able to get this fixed in court, but that could take more time than they’ve got. So it’s a big gamble, but at the end of the day, where does it get them? It’s not like google doesn’t have their own voice codec, interface to PSTN, etc. so it doesn’t seem like a compelling advantage.

FWIW, the appeal of the data-only phone is undeniable, even at some inflated cellphone data rates. Running Skype’s CODEC at the lowest 6 kb/s rate and assuming 10% overhead, you could basically talk 24/7 for a month with about 2GB of data.

>Even if Elop isn’t crazy, Microsoft’s not on the same page. The carriers hate Skype more than just about anything else.

And this comes on top of a very long history of the carriers stiff-arming Microsoft out of a (justified) fear that Windows phones are an attempt to cream the profits off the top of their industry while laying much of the risk off on Microsoft’s licensees. They saw that happen in the PC industry and didn’t like the idea of being on the shitty end of it one little bit.

Thus, WP7 would have had an uphill battle to fight even if it were a massive technology win. Buying Skype has further poisoned a relationship that was bad to begin with.

Yes, the carriers fear Microsoft. Yes, the carriers think that Skype is poison. However, except for some i-dotting and t-crossing, Microsoft has bought Skype. The bridge has been burned. Are carriers seriously going to sell subsidized NoWin phones after this? I’m sure they’ll get what they can for their existing WP7 inventory, buy why would they pick up anything new? Perhaps Microsoft is stupid enough to use Skype as leverage to get back into the subsidized carrier channel, but what would that get them? Another chance to fail the same way they’re failing now?

So what is NoWin left with? Direct-to-consumer, unlocked (bring-your-own-SIM) “dumb bits” phones. Skype roaming between 3G and Wi-Fi. Trying to use “open access” rules to get on LTE networks where they can. And so on. What do they get? Instant relevance. Skype’s huge userbase re-evaluating their mobile ecosystem. How else could Skype be worth $8.5 billion? Maybe it isn’t enough, but at this point in the game isn’t a “Hail Mary” their only hope? I absolutely agree that they might be stupid enough to not see that, but I don’t think we can rule it out, yet.

They can try it, but the license fees on WP7 mean any handset maker that plays along will likely get its clock cleaned by cheap Chinese Androids. The Android army can take the slice of the BOM that Microsoft is demanding but Google isn’t as profits, or give it away to gain share. Microsoft has no effective reply to this.

1) Verizon Et Al. Right because the reason why verizon didn’t sweep all before it an orgy of destruction and spending is because it wasn’t released at the same time! Hey Rocky, watch Apple pull a rabbit out of a hat. This time for sure kids… PRESTO! (No doubt about it… he needs a new religion)

“What if NoWin were to try what Google tried? A phone without carrier lock-in. Pay-per-month financing on a LTE phone”

AFAIK, _every_ smartphone Nokia build so far has been available without carrier lock. There is nothing stopping you from picking up a N9 (when it comes out) and using it with whatever pre- or post-paid plan you care to use it (at least in Europe…)

@esr
“The Android army can take the slice of the BOM that Microsoft is demanding but Google isn’t as profits, or give it away to gain share. Microsoft has no effective reply to this.”

They have. If they are willing to pay $8B for Skype, they might consider spending $5B on subsidies. $5B gets you $50 subsidy on 100M handsets.

For MS, losing the mobile phone wars equals liquidation. You cannot get 80% margin in a competitive market. And MS need $1B a month revenue to prevent their share prices to collaps. The moment stockholder realize WP7 is dead on phones, they will plunder the cash reserves and sell off everything else.

>If they are willing to pay $8B for Skype, they might consider spending $5B on subsidies.

At which point Microsoft’s shareholders will ask, quite reasonably, why the company is throwing good money after bad. With share at 6.8% and dropping, I guarantee that at the next board meeting Ballmer would get heavy pressure to refocus on the core business (Windows and Office) rather than plowing gigabucks into a loser.

@esr
“At which point Microsoft’s shareholders will ask, quite reasonably, why the company is throwing good money after bad.”

My point. But just as paying $8B for Skype was simply burning money, I think Ballmer will try it.

I already saw analysts calling for Ballmer’s resignation AND the cutting up of MS into investment vehicles and milking cows. For Ballmer, it is getting into the mobile market or being fired. So it is in his personal best interest to bet the company on that.

I think Microsoft has more interesting replies than subsidies. For instance:

1. Given Skype’s userbase I think there’s a consumer segment where a NoWin phone + integrated Skype is more attractive than a Chinese Android + Google Voice. Among other things (a) more people you know are likely to be reachable via Skype and (b) you can’t even get Google Voice outside the US.

2. If NoWin + Skype drives more Skype usage, there’s potentially some cross-subsidy from the additional Skype revenue (from their PSTN integration and the like).

2. Should Microsoft finish eating Nokia’s smartphone business (which seems likely at this point) they will lose their other “partners” (most of whom are betting against WP7 anyway), but they also won’t have to worry about license fees, giving them more flexibility.

>but they also won’t have to worry about license fees, giving them more flexibility.

Er, that would be the flexibility to do what? Not reflect the development costs of the software in the phone’s unit price? That’s the same problem with the same issues as a subsidy. The economic problem Microsoft has, which is that the WP7 dev group has to somehow make more than it costs to run, won’t go away simply because Nokia got bought.

You may be right about the Skype synergies, though. If the carriers don’t sabotage it, which they’ll be doing their damnedest to.

@esr
“The economic problem Microsoft has, which is that the WP7 dev group has to somehow make more than it costs to run, won’t go away simply because Nokia got bought.”

Not in my view. WP7/WP8 dev must not cost more than Office/Sharepoint can extract from customers. That is the beauty of a monopoly: If the cost of sustaining the monopoly (subsidizing phones, developing OS) is less than the revenues of the monopoly (>80% margin on Office and Sharepoint), then it pays.

Trying to use “open access” rules to get on LTE networks where they can.

Does that even work outside of the US? Does anybody even remember who Nokia is inside the US?

Given Skype’s userbase I think there’s a consumer segment where a NoWin phone + integrated Skype is more attractive than a Chinese Android + Google Voice. Among other things (a) more people you know are likely to be reachable via Skype and (b) you can’t even get Google Voice outside the US.

At first blush, that seems to make sense, but Google has already moved to counter. This is, IMO, yet another area where open will win, and when google implements this in Chrome and then tosses an additional $5 or 10 million to 500 lb. gorilla Mozilla to implement this in Firefox, it’s game over for Skype.

Note that Google doesn’t have to piss off the carriers with this. In fact, if I were Google, I would be quietly explaining to all the carriers right about now about how to engineer delays for any incoming or outgoing A/V stream in their internet routers such that the only thing that was visibly affected was two-way communication. It might even be possible to do this and adhere to the open access LTE rules quite nicely.

Of course, longer-term, this will disintermediate the carriers even more, because the more interesting apps that only run well when there is a wifi hotspot nearby, the more wifi hotspots there will be. But google won’t bother to explain that aspect of it to the carriers, and eventually the carriers will give up and transport bits as efficiently and competitively as they can in any case.

@Patrick Maupin
“…, because the more interesting apps that only run well when there is a wifi hotspot nearby, the more wifi hotspots there will be.”

There is comming a flood of cheap Chinese Android phone/tablets. All will have WiFi. The phone networks are already choking. So many opportunities for businesses that want people to linger around their premisses.

I expect that everyone who wants customers to hang around their place will install free WiFi hotspots. Think public transport (already tested in some fast trains overhere), pubs, coffee houses, shopping malls, restaurants, theme parks, museums, etc. That will turn up the heat for the phone companies.

That is on of the reasons so many governments are working to make free WiFi illegal. Eg, in the past the UK governments have done everything they can to support their phone carriers in their fight against the public. Now they are passing draconian “copyright” laws to make free WiFi next to impossible. The three strike laws have the same effect: In the end they will target free WiFi hotspots.

“They can try it, but the license fees on WP7 mean any handset maker that plays along will likely get its clock cleaned by cheap Chinese Androids. The Android army can take the slice of the BOM that Microsoft is demanding but Google isn’t as profits, or give it away to gain share. Microsoft has no effective reply to this.”

By extorting royalties on patents, they will make every other handset as expensive as theirs.

“And most of all, for any Microsoft delusions of a future – Nokia has now committed to one billion – thats billion with a B – new Qt devices. Qt is either Symbian, or MeeGo (or Ballmer get this – Android) but categorically Qt is not Microsoft. So? Ballmer? How’s it feeling now, that Nokia promises a launch of the first (possibly only) Microsoft WP phone in Q4 in only 6 European markets, which is estimated to sell 125,000 total units. But meanwhile Nokia branded smartphones explicitly NOT running Microsoft (ie Qt based) will be produced in excess of one billion units. Did we want to do a re-calculation of that market share? Suddenly Microsoft at 2% market share seems ‘big’ compared to how tiny it will be with the ‘Nokia’ phones?”

“Why did Nokia have to lose more than half of its market-leading market share in only four months (literally, a world record, the single greatest loss in tech history of any brand, any technology, ever). Why did Nokia have to abandon 3 Billion dollars of quarterly revenues (12 Billion on annual level – and when I say ‘abandoned’ can you now trust me, this money is never coming back to Nokia, thanks to Elop) and half a billion dollars of profits (2 Billion annual level). This goof is the single most expensive CEO to destroy corporate value ever! Why is he allowed to stay in power?”

I’m pretty sure “open access” rules work better outside of the US, not worse. Remember, it was Europe that gave us GSM and the SIM. And there are plenty of countries (both inside and outside Europe) where there are overbearing telecoms regulators that say things like: You must sell unlocked handsets (even if they are subsidized). You must let consumers bring their own equipment. And so on. I believe LTE deployments are slower outside of the US, but I’d bet getting on those networks will be no harder (and quite possibly easier) than getting on LTE networks in the US.

As for Google’s counter, I see the potential, but I think you’re seriously underestimating the amount of traction Skype has. My family lives overseas, far away from our daughter’s grandparents. One of the major ways we keep in touch is Skype. Since I noticed their recent shenanigans, I floated the idea of using something else. It was a complete non-starter. Being built into the browser wouldn’t have changed that (even if Google managed to get their voice and video chat built in beyond Chrome and Firefox). I think there are lots of those “hard-to-move” users and they’re what make Skype valuable (for now).

I agree that the carriers will try to make their networks Skype-hostile, but, again, I’m not so certain that they’ll succeed. There is an incredible variety of smartphone traffic (web browsing, media streaming and downloads, picture uploads, Twitter/Facebook/…, games (notably including social gaming), corporate VPN access, GPS/Maps, all sorts of background syncs, …). I think taking out even one of these (even temporarily) as “collateral damage” would lead to a swift and severe backlash, so carriers will need to tread carefully. I think that means Microsoft/Skype has an advantage in the “arms race”. Does that mean they’ll win? Not necessarily. But (much as I wish they didn’t) I think they have a real chance.

Patrick, talk about unwarranted assumptions! Your Samsung/Apple fantasy is full of them. You really think Samsung would prefer lawsuits to the roughly $8 billion of product Apple buys from them these days? You think that Jobs wants them to drop their entire cell phone business, and not just stop copying Apple products? You think Samsung is eager to lose their largest customer?

> Patrick, talk about unwarranted assumptions! Your Samsung/Apple fantasy is full of them.

Obviously, my tongue was a long way into my cheek when I was trying to channel Samsung and Apple. Yours, not so much…

However, you raise some specious questions which I may as well answer:

> you really think Samsung would prefer lawsuits to the roughly $8 billion of product Apple buys from them these days?

That’s a false choice. Samsung has the lawsuits whether they want them or not.

> You think that Jobs wants them to drop their entire cell phone business, and not just stop copying Apple products?

Maybe not their entire cell phone business. Just the successful part. Which, by Apple’s definition must be copying Apple’s products. How else could they be successful?

> You think Samsung is eager to lose their largest customer?

Depends on which part of the business. Apple’s theoretically going elsewhere for CPUs. CPUs is where Samsung might have had some leverage, and also might be where they need capacity for their own internal business. Things like NAND and DRAM are commodities, which means that Samsung and Apple can agree to disagree about other things, yet come to a market-based price for these.

I don’t know the exact value, but I would guess the CPU business is around 15% of that $7.8 billion.

@apoc: “Mozilla could release LTS (long term support) version every two years -> problem solved, right?”

Sure, they COULD. But go back and re-read that article and tell me if you think it’s likely, based on the quotes given. I mean, if it’s likely BEFORE they find out how tiny the fraction of their userbase that’s corporate users really is. Remember, these are the inheritors of the mantle of “we’d rather write cool new stuff rather than fix bugs.” And see that comment about the roadmap? It’s really like that. If I were a corporate IT type I certainly wouldn’t be getting warm and fuzzies.

well i can’t explain why Nokia shareholders hadn’t fired Elop
it heart my head to understand why Nokia is heading that way
1) drop Nokia value so it can be swallowed by M$
2) shareholders have some financial reasons to do what are they doing witch is not beneficial to Nokia
3) M$ want to kill any true GNU/Linux based system (Maemo and Meego and not Android) in the smartphone world
4) don’t assume conspiracy that which is explained by stupidity

Of course I knew you were trying to be funny, Patrick, but good humor has to have some truth at the core. The idea that Samsung wants to ditch their largest customer to “free up fab capacity” is just silly. With all due respect, you seem to be letting your cheerleading for Android override your common sense. Samsung may be enthusiastic about Android, but I really doubt they’re so enthusiastic that they are eager to lose an $8 billion/year customer.

As Whitmore sees it, an iPhone 4S that is unlocked, priced around $349, and comes with a pre-paid voice plan would “drive significantly greater penetration” into an addressable market that has grown to include 1.5 billion potential customers in 98 countries, two thirds of whom prefer pre-paid plans.

The only thing wrong with that theory is that $350 is only “mid-range” in the sense of being half-way between the $50 and the $650 phones. In terms of addressable market, it’s still near the top. In a comment on a previous article I pointed out where an analyst said that Apple didn’t sell nearly as many discounted iPhone 3g phones after they brought out the 3gs as they expected. One possible explanation for that is the unusual dynamic between Apple and their core customers, many of whom only want the “best.”

If Apple does pursue this strategy, it will be interesting to see what their per-device sales numbers look like in a couple of quarters. Of course, it does give them a bit more pricing flexibility. That $350 number could later be discounted to $250, without pissing off their core $650 constituency.

> The idea that Samsung wants to ditch their largest customer to “free up fab capacity” is just silly.

As I mentioned, they might only be ditching part of the business. Or not. Who knows? I don’t know enough to know whether it’s silly or not. But they do have other customers, and they will probably continue to sell commodities to Apple in any case — it’s just the processor that is in question.

The likely possible technical reason for the switch is improved performance for Apple from a TSMC (or Intel) fab.

Any other non-technical reason (which the trade press speculation is that it was) would be because of an agreement to disagree. Since it’s just the processor (and not NAND or DRAM), probably 15% of the business, it is highly unlikely that it boils down to a simple pricing dispute. So either Samsung was really, really willing to walk, or Apple wanted to punish them. If it’s the latter, you could view that as a hard-nosed business, or you could view it in the totality of the bogus “look and feel” lawsuit, and say that’s just more evil.

If this meme is accurate, then perhaps (a) Apple really doesn’t have new stuff (LTE) ready yet; and (b) really is doing a cost reduction; and (c) really does plan to lower the price some to fend off Android at the midrange.

It’s interesting that some analysts are saying late September / early October, and one analyst is saying mid-to-late August with an aggressive ramp.

For any other company, these would effectively be the same timeframe. If the mid-to-late August date is correct, maybe it means that the release is not a Jobs-worthy event — in other words, maybe it really is just a cost reduction product refresh.

Or maybe it just means that Apple has enough pent-up demand for whatever it is they’re bringing out, and don’t have to waste Steve’s magic pixie dust on this release…

Patrick Maupin said: That 12MP camera from 2 years ago would look a lot sexier with the entire Android marketplace and UI underneath.

Well, yes, it would.

But on the other hand, it will never* look sexy to any appreciable degree, because phone-size sensor and 12 MP means “more noise than a Merzbow concert”.

(* By “never” I mean “not in the foreseeable future”, or the next two or three years. Someday, probably it’ll be pretty good; but right now 12 MP is too dense for really good quality with sensors 5 or 6 times as large [as a phone sensor] in area [on a point-and-shoot].

I’d still be using a 6MP P+S rather than a 10MP for the improved image quality one if not for an unfortunate dropping incident…)

It certainly won’t capture as much light as a DSLR, but even so it’s more of a camera with an attached phone than a phone with an attached camera — probably gives better pictures than most cellphones, especially when you hit the flash.

>”If they are willing to pay $8B for Skype, they might consider spending $5B on subsidies.”

esr: “At which point Microsoft’s shareholders will ask, quite reasonably, why the company is throwing good money after bad. With share at 6.8% and dropping, I guarantee that at the next board meeting Ballmer would get heavy pressure to refocus on the core business (Windows and Office) rather than plowing gigabucks into a loser.”

I don’t understand why the board hasn’t thrown out Ballmer long ago. If his previous dumping of money into black holes didn’t get him fired, I don’t see why another $5B in subsidies would get suddenly him the boot. Has anyone seen anything in print, ever, indicating that the board is not happy with him?

– “He noted that an app for a 10-inch screen is (or, at least, should be) a totally different experience from an app for a 3.5-inch screen.” / adapting to larger screens is tough (note: doesn’t apply to games)
– Android Market does not highlight tablet-compatible/adapted apps
– No existing monetary demand for Honeycomb/tablet apps to justify investment/expenditure
– Waiting for Ice Cream Sandwich.

Of the points mentioned, the last seems less relevant (which the article confirms (“none of the developers [indicated ICS]…is a factor”). It’s great whenever Google improves their software, but unless they’re radically departing from the Honeycomb interface, why would a slightly-improved Honeycomb system suddenly sell so much better than the current devices? Especially with the Galaxy Tab 10, which is iPad-caliber or better by all accounts in terms of the device itself.

The prices have to be reasonable, and people have to buy them. App developers have to make a choice to invest in the market.

What the version number is doesn’t matter too much at this point, I’d say.

I don’t understand why the board hasn’t thrown out Ballmer long ago. If his previous dumping of money into black holes didn’t get him fired, I don’t see why another $5B in subsidies would get suddenly him the boot. Has anyone seen anything in print, ever, indicating that the board is not happy with him?

A quick search turned up something interesting from May. The comment I found interesting was “I don’t see anybody else on the management team at Microsoft that I think would be much better than Ballmer.” Which doesn’t sound like “Ballmer is awesome” but more “ok he sucks but there’s no real other option”. Oh and apparantly Bing has lost $7 Billion over the last 4 years.

500k / week is impressive, but 4.4% week over week is the number that shocks me. Psychologically it had felt like the pace of activations was slowing down at least a little, but 4.4% w/w is crazy. If that keeps up, I think we’d be looking at 1.5 million activations / week by the end of the year and 4.5 million / week a year from now both of which seem incomprehensible.

I think you missed a factor of 7. It’s 500K/day — only the increase was given per week. That’s 45 million a quarter. Samsung just might, in fact, need to free up some fab capacity for their share of this growth by some time early next year…

BTW, if you consider that there are 5 billion cellphones in the world, assume that, unlike the average American, most people hold on to them for a long 5 years, and assume that Android will take over 70% of the global cell market in a couple of years, the number will eventually need to be 2 million/day.

So at the current rate, Android could reach logistic growth by next spring…

>– almost 60 million activations for Q3 (59.68 if anyone cares) – over 104 million activations for Q4

I ran an average on the overall U.S. smartphone userbase trend by month as described in the comScore figures; it seems to be rising at about 2 million users a month. That implies about 85 million at end of Q3 and about 91 million at end of Q4.

Thus, if not for tablets, your extrapolations would imply Android smartphone market-share of 70% and 114% respectively. While 70% in Q3 isn’t impossible, it’s at the way upper end of my range of plausible estimates – and clearly %114 really is impossible.

If present activation rates are going to continue, then, the Android tablet market has to take off like a rocket in Q4. I think it is reasonable to expect this. In any case, the activation rate today is high enough that we’re unlikely to see the stallout that Charlie Wolf is predicting.

I read somewhere a couple of days ago that one analyst was expecting Apple to ship 45 million iPhones in the Christmas quarter this year. (Just looked for it and couldn’t find it again.) Anyway, why shouldn’t Android (currently shipping at over twice the rate of Apple) keep pace?

Comparing the rumored Nexus Prime to the iPhone 4 isn’t reasonable (though, to be fair, a comparison to the SGS2 wouldn’t be enormously different). The real competitor to the Nexus Prime is the iPhone 4S / 5 / whatever they’re guessing it will be called this week. We’ll know the details of that soon enough.

The thing I’m more interested in is that there was supposed to be a Nexus tablet way-back-when. Whatever happened to that? Wouldn’t Ice Cream Sandwich need a flagship tablet as well as a flagship phone?

>As for Google’s counter, I see the potential, but I think you’re seriously underestimating the amount of traction Skype has. My family lives overseas, far away from our daughter’s grandparents. One of the major ways we keep in touch is Skype. Since I noticed their recent shenanigans, I floated the idea of using something else. It was a complete non-starter.

This. My mother got broadband just to talk to her grandchildren on Skype. (My sister’s kid 600km away, my kid the other side of the world.)

She’d been on dialup before and knew roughly what “Skype” was – phone over the internet. Video is JUST the thing for a grandparent.

Remember all those decades where no-one could understand why videophones had never caught on? It turns out the natural market was grandmothers, and it was just a problem of network effect.

> She’d been on dialup before and knew roughly what “Skype” was – phone over the internet. Video is JUST the thing for a grandparent.

Yeah but “just like Skype and firefox/internetexplorer all in one, except works better and has better security” should be a plenty fine explanation for why to install the chrome browser once they get all this up and running.

“Nielsen also found that Android’s share of recent smartphone acquirers was flat over the past three months while Apple’s iOS was the only smartphone OS to gain share among this group, jumping to 17% from 10% in the prior three-month period. “

There’s no actual surprise here and nothing I feel any need to debunk. From the referenced article:

Android represented 38% of the smartphone market in May, up two points from 36% in 3-month period ending in April. Apple’s iOS platform gained a single percentage point over the same period to climb to 27%, and RIM’s BlackBerry platform slid two points to 21%.

If you look at my comScore page, you’ll see that these figures are perfectly consistent with the trend lines for the last 18 months. Android is still gaining about two points of share per month; Apple’s share over the entire period has increased less than that, and the changes look like statistical noise; and RIM is still plummeting.

In particular, there is no sign in these figures of the supposed Android stallout that Charlie Wolf has been trumpeting over at Needham. So, um, what am I supposed to want to debunk here?

Note how the breathless “Apple is now driving smartphone growth” doesn’t really jibe with 49% of “new smartphone acquirers” acquiring Android and 31% of “new smartphone acquirers” acquiring Apple. (27% of the 55% of acquirers who got smartphones, vs. 17% of the 55% of acquirers who got smartphones).

If new iPhone purchases were really that much lower for a 3 month period 3 months ago, and the average consumer was interviewed in the middle of the month, the prior 3 months would have been mid-November – mid-February. In other words, it would have been lowest right after AT&T flooded the market with cheap iPhone 4s to stall Verizon out, and before Verizon actually got the iPhone. In other words, it looks like cherry-picked data, especially in light of the fact that in March, they did a survey of people who had purchased a smartphone in the last six months, not three. You know that companies like Apple engage in “pay for play” — they probably cherry-picked the numbers for a good spin. Here’s the April 26 Nielsen report about March:

This would have covered, on average, mid-September – mid-March, or part of the period when AT&T was pushing really hard, as well as the “breather” period (though not the period when the iPhone 4 first came out). In that survey, 25% of recent acquirers got an iPhone, and 50% of recent acquirers got an Android.

So it’s certainly fair to say that the percentage of recent smartphone acquirers who chose Apple was 31% in the 3 month period ending in May, vs 25% in the 6 month period ending in March, which is a really good gain, albeit one I think we already noted in some other contexts — with Verizon getting the iPhone and AT&T pumping out really cheap new and refurbished iPhone 3s, we started to see this with the good technologies report and the carrier quarterly reports. I came to the conclusion that Apple was eating RIM’s lunch at the time, and given that Android numbers haven’t really changed, I think that’s still a fair assessment.

As far as Android goes, yes it dropped from 50% of new acquirers in the 6 months period ending in March to 49% in the 3 month period ending in May. This might be a trend, or just statistical noise in the survey, or just difference in methodology and reporting.

Which brings us to one last Nielsen report — the May 31 report about April:

This one was done in between the other two. It shows total installed market share for Android and Apple each down 1% from the one done the month before. I commented on it at the time. It makes it look like RIM is completely kicking butt, because it’s up a full point on installed base, with both Apple and Android down a point each. I’ll leave the refutation of that to someone more qualified.

There is a WWII anecdote about a Japanese man who told US military how he knew long ago that Japan was losing despite the complete censorship: “Every new glorious victory over the enemy was closer to home”.

This type of “New data” does remind me of that story. Every time, Apple is gloriously gaining market share from a lower start and Android is stalling at a higher level.

I don’t remember when the last time I made a prediction was, but it was probably some time last year, and I think I predicted under 20% max for Apple, assuming that Apple didn’t lower their prices.

Since then, RIM and Nokia have both imploded much more quickly than the market itself would have dictated. Terrible management problems. If you look at the trends, it appears that Apple has picked up a lot of that business that might have organically gone to Android a year or two later with a bit more mindshare.

Also, guess what? A lot of Apple’s sales last quarter were the 3GS. Possibly about half. Apple doesn’t publish those numbers, but a lot of people have teased them out of other data available. So Apple may very well have looked dismal without the 3GS holding it up.

Apple may very well keep some of their gains (especially if they bring out a lower-priced iPhone 4s).

As a final note, the article you mention was about domestic US share. Globally, Apple is under 20% (or was last quarter)…

@Patrick Maupin It does seem you have gotten a little more optimistic about Apple’s prospects lately. Your analysis seems reasonable.

I think we may see a significant divergence from market to market. As in US/Western Europe may have significantly higher iPhone share than Africa/Asia where people are more cost sensitive. We already have a precedent for divergence with Symbian having close to 0% in the US and huge share in the rest of the world….. It will be interesting to see what happens.

Apple can certainly pick markets to spend more energy on (typically the richer ones). They can also drop prices, but they’ll never drop them enough. I think they will stay under 20% globally on sales, and (depending on pricing etc. on new models), will probably stay under 35% of the domestic installed base (as measured by comscore). We might even start to see that shrink a bit from where it was, before the iPhone 5 comes out — stay tuned, because the new comscore numbers should be out soon.

BTW, as Winter points out, most of the Apple-centric data has a lot of spin to it.

But he presented no evidence. He may have thought he did, but let’s deconstruct it:

“Apple overtook ZTE in Q1 2011 to become the world’s fourth-largest handset maker, up from sixth position one year ago.”

Umm, yeah. But ZTE builds all kinds of phones, not just smartphones. In a declining dumbphone market, it is amazing they do as well as they do. In smartphones, they have stellar growth. They sold 3 million units last year, expect to sell 12 million this year. Why is he bragging about Apple beating up a company that sold 3 million smartphones last year?

“How did the competitors do?”

He then compared them to Nokia, LG and Samsung. We know about Nokia. Samsung and LG are in the same boat as ZTE, struggling to build new smartphone businesses to replace precipitously declining dumbphone businesses, and, at least Samsung is succeeding very well. But guys like the Apple Holic like to have it both ways — they correctly point out that Apple, with its 18.65 million smartphones, shipped more smartphones than Samsung, but when they want to distract from the fact that Samsung’s smartphone business is growing like wildfire, they measure growth by talking about total handset business, which in the case of Samsung includes a rapidly diminishing dumbphone business component.

If I take the same data that Apple Holic starts with, and twist it the opposite of the way he does, I can explain, factually and correctly, that Samsung’s total handset business was 3.5 times the size of Apple’s last quarter, and that Samsung’s smartphone business grew 382% year-on-year, while Apple’s only grew 111%. See how easy that is?

Now, thinking about the future, which trend is more relevant: smartphone growth or total handset growth?

Also, which number better indicates Samsung’s manufacturing and distribution capacity: the smatphone shipments that were only 2/3 the size of Apple’s, or the total handset shipments that were 3.5 times the size of Apple’s?

With Apple not having any new products this quarter, many analysts are showing Samsung and Apple running neck and neck, with some even predicting that Samsung might be the global smartphone shipment leader this quarter. We should know one way or another in a few weeks.

Any predictions as to how Apple and their paid toadies would spin that particular “victory” should it come to pass?

Actually, I shouldn’t say “paid toadies.” “Paid toadies” care at least a little bit about reputation, so that they can sell spin for another company later. I’m sure most of the press is merely by hardcore fanbois.

If you think iPods are relevant because they use the same iOS as the iPhone, well that depends. What percentage of the utility of the iPhone apps that most people actually use and care about derives from the fact that the phone is always connected?

The iPod touch may not be irrelevant yet, but it’s not that relevant to me, and rapidly declining in relevance in the market. The discussion here started out just about cellphones, and some of us feel that cellphones are still really the important category, but will reluctantly discuss tablets as well:

– Cellphones — always with you, always connected
– Tablets — not always with you, some always connected, bigger screen than a cellphone
– iPod touch — alway with you in some cases, not always connected, same size screen as a cellphone

I think Apple stands a chance of making the iPod touch more relevant, but it’s purely an arbitrage play. I could see Apple coming out with an iPod touch with 3G/LTE connectivity, with a reasonably priced data plan (and, obviously, no tethering). Then people would carry two devices — a featurephone and their iPod. The only reason to do this would be because the carriers won’t give reasonable pricing on cellphone voice and data plans, but Apple might be able to entice one of them to give reasonable connectivity for a reasonable price for the new device. Long term, though, it doesn’t matter — the smartphone certainly is the eater of gadgets and will certainly consume the iPod.

(It may seem that not having your entertainment battery be the same battery as your cellphone battery could be another reason to carry an iPod and a cell simultaneously, but this is still an arbitrage play — as the price of cellular bit transport declines, the cost of simply carrying two cellphones will drop. Even today, in fact, you could probably get an Android phone to act as your PMP and simply not activate it, but people aren’t thinking that way yet.)

The smartphone will eat the iPod, but it can’t fully consume bigger tablets for the simple size reason. It’s also completely up to the carriers whether the average tablet will have 3G/LTE connectivity. If they don’t provide reasonable data plans, WiFi only will keep increasing in popularity.

> I don’t have a problem with giving the iPod touch a relevance factor. But it’s not zero.

Perhaps not, but from my perspective, it’s probably closer to zero than to one, and anything I say that makes it seem like zero is because I’m reacting to the all the spin that makes it sound like it’s a two.

That’s interesting. I’m not quite sure I’d characterize it the same way that you do though. Most companies would respond that way whether they were really changing, thought they already had changed, or thought they didn’t need to change.

Very few companies would make a more direct meaningful response. The last one of those I saw was Elop’s “burning platform” memo, and we all know how that’s working out for him…

It was full-panic mode, damage-control, CYA time at RIM HQ, no matter how you characterize it…

That “open letter” was RIM’s equivalent of the “Burning Platform memo.” And so far, their management has been farking it up even worse than Elop farked up Nokia. At least Elop tried to correct course, even if his idea of a “correction” involved bending over and fellating Microsoft. RIM’s management would rather sweep this under the rug and go back to fiddling while their company burns.

>I could see Apple coming out with an iPod touch with 3G/LTE connectivity, with a reasonably priced data
>plan (and, obviously, no tethering). Then people would carry two devices — a featurephone and their iPod.
>The only reason to do this would be because the carriers won’t give reasonable pricing on cellphone voice
>and data plans, but Apple might be able to entice one of them to give reasonable connectivity for a
>reasonable price for the new device. Long term, though, it doesn’t matter — the smartphone certainly is
>the eater of gadgets and will certainly consume the iPod.

There’s one big assumption built into your thoughts here: that the cell carriers will remain the dispensers of voice minutes and air time, rather than becoming simple bit pushers. One of the ways many of the prepaid/MVNO/alternate providers attract customers is by offering them text/data plans with limited minutes since for at least some chunk of the cell industry, the voice minutes don’t matter much. Put a 3g data modem on an iPod touch, and you have a perfect device to capture that chunk of the market, especially since the new messaging in iOS 5 would eliminate the need for an SMS plan, facetime could handle a large chunk of calling (bear in mind, this is also the same market segment that loves push to talk, so that everyone could see and hear probably won’t be an issue), and realistically I think it’s a matter of when, not if, Apple puts a voice chat functionality into iOS.

Yes, the messaging service would only work to other iOS devices, but that doesn’t have to be a huge issue. Ask verizon how well their whole “In” network thing worked out for them, or just look at the popularity of PTT phones when they were big.

Long term, I don’t think the “smart phone” eats the mobile computing market, I think “voice calling” becomes just another feature check box. Sure, it’s a subtle distinction, but it’s about attitude, and I think long term the attitude will be that you pay for a pipe, and you connect devices to that pipe, and voice, video, data whatever are just functions of the device.

Long term, I don’t think the “smart phone” eats the mobile computing market, I think “voice calling” becomes just another feature check box. Sure, it’s a subtle distinction, but it’s about attitude, and I think long term the attitude will be that you pay for a pipe, and you connect devices to that pipe, and voice, video, data whatever are just functions of the device.

Long term, I’d agree with you.

But what you’re talking about is the abject surrender of the carriers.
And my gut feel is that that is not going to happen until the war gets much bloodier than this.

But another comment on point…

Put a 3g data modem on an iPod touch, and you have a perfect device to capture that chunk of the market

Right so what you’re saying is that iPod touches AS THEY STAND aren’t that device and don’t influence cell phone usage.
What this seems to say to me then is that adding iPods is mostly irrelevant for discussing cell phone interaction, the more interesting thing to track is things like cases or dongles that provide 3g/4g/cell network access to iPods. Unfortunately my google-foo can only find that devices like that are planned. I can find references to 2 (one by ZTE the other by GSLO) but also note that they apparantly require jailbreaking to work and the only one i can find reference to being on sale(the ZTE one) is under patent threat from the other one.

There’s one big assumption built into your thoughts here: that the cell carriers will remain the dispensers of voice minutes and air time, rather than becoming simple bit pushers.

I don’t assume this at all, and frankly you and I have both written and read enough here that I’m mildly insulted.

But I do assume they will try, and expect that the transition will probably be slow and painful (witness the government rolling over on T-Mobile) and that the nimble vendors in the smartphone space will be savvy enough to take advantage of the slow transition time.

Long term, I don’t think the “smart phone” eats the mobile computing market, I think “voice calling” becomes just another feature check box. Sure, it’s a subtle distinction, but it’s about attitude,

It’s a distinction without a difference for the purposes of this blog. When Eric wrote that the smartphone is the eater of gadgets, that’s a true statement that doesn’t matter what Joe Blow calls the eventual smartphone or how he thinks of it. You’re absolutely right that we’ll be paying for (a connection to) a pipe, and you’re right that some devices with those connections won’t have voice. But most of them will, and whichever one is the one that ate all the gadgets certainly will.

>And my gut feel is that that is not going to happen until the war gets much bloodier than this.

Absolutely.

>What this seems to say to me then is that adding iPods is mostly irrelevant for discussing cell phone
>interaction, the more interesting thing to track is things like cases or dongles that provide 3g/4g/cell
>network access to iPods.

I guess what I’m trying to say is that discussing “cell phone interaction” is missing the point. It’s why tablets running these mobile systems, whether iOS or Android matter. It’s why the cloud implementations that both Apple and Google are developing matter. And it’s why the iPod touch matters. It’s like I mentioned previously, one of Apple’s unique advantages in this space is of all 3 of their iOS devices, only one is intrinsically linked to the carriers in the consumer’s mind. This is a huge thing, as the shift from “cell phones” to “mobile computers with cell connectivity” occurs. Apple already has the distribution channel and image that their devices can work without the carriers. And with face time and the new messaging system they want to implement, the difference between an iPhone and an iPod Touch quite literally becomes just the cell connectivity and the voice calling. Add a 3g modem and it’s just the voice calling. The camel’s nose in the tent of the carriers voice / airtime position.

>I can find references to 2 (one by ZTE the other by GSLO) but also note that they apparantly
>require jailbreaking

The ZTE one is on sale from Virgin Mobile, and as near as I can find, I don’t see anything about requiring a jail break to work. I can’t speak to the patent threat though.

>I don’t assume this at all, and frankly you and I have both written and read enough here that I’m
> mildly insulted.

No offense intended, I wrote that because of this line :

“The only reason to do this would be because the carriers won’t give reasonable pricing on cellphone voice and data plans, but Apple might be able to entice one of them to give reasonable connectivity for a reasonable price for the new device.”

although looking back, I it appears you were saying “The only reason to [carry an iPod with 3g connectivity and a separate dumb phone]” rather than “The only reason to [release an iPod touch with 3G connectivity]”, so my apologies for misinterpreting.

>It’s a distinction without a difference for the purposes of this blog. When Eric wrote that the
>smartphone is the eater of gadgets, that’s a true statement that doesn’t matter what Joe Blow calls
>the eventual smartphone or how he thinks of it.

I think it does matter from the perspective of what the future will look like. Right now (and for the short and medium term future) the cell carriers are still the gate keepers to the world of mobile computing for probably 90% of consumers. If they want to get into mobile computing, they will go to their cell provider, and choose from a pre-culled list of approved devices, just like they do now for their dumbphones. To see what sort of effect a shift away from this could have, imagine a world where you bought your computer, subsidized, from your ISP to get online*. Sure you could by an unlocked HP or Dell or Apple, but they cost more money, and there is no guarantee your ISP will allow it on their network.

If we can shift the mind set away from “smart phones” and to “mobile computers that you buy service for, just like you do for a regular computer”, we can hasten the collapse of the current cell phone model and move to something that will allow mobile computing to truly become ubiquitous. That’s why the fact that both Apple and Google capitulated to the subsidized price model makes me disappointed. It’s going to be much harder to break that model now that consumers have come to expect their mobile computers to be subsidized.

* Note that the carriers are trying this with the netbooks, and it’s not really working well, in part because people aren’t of the mind set they need to get their computer from the carrier.

None taken. Thanks for the explanation. Sorry for the ambiguous wording.

If we can shift the mind set away from “smart phones” and to “mobile computers that you buy service for, just like you do for a regular computer”, we can hasten the collapse of the current cell phone model and move to something that will allow mobile computing to truly become ubiquitous.

Sure. The first provider that figures out how to give an individual multiple SIM cards at a single price and avoid any kind of arbitrage wins. Perhaps by throttling total instantaneous bandwidth to all the cards together. But… I still think the average human wants to carry exactly one device on his person most of the time, and that’s going to have voice capability (along with a lot of other capabilities).

That’s why the fact that both Apple and Google capitulated to the subsidized price model makes me disappointed. It’s going to be much harder to break that model now that consumers have come to expect their mobile computers to be subsidized.

I’m not nearly as worried about this as you seem to be. For one thing, prepaid subscriptions are growing by leaps and bounds. For another thing, the subscription model helped to get the volumes up, and in electronics manufacturing, that is everything. When all you’re doing is taking a few molecules of sand and a few molecules of petroleum and a very few molecules of precious metals, and rearranging them a bit, it’s all about getting the volumes up into highly automatable territory.

So for early adopters, if you simply view the subscription model as buying communications plus a loan (at a relatively high, but not neighborhood loan shark, rate), it’s really enabling a lot of people to afford the technology before they otherwise would have. Not really a bad thing, unless the carriers have the ability to deny non-subsidized equpiment access to their network. Which they are increasingly unable to do.

Finally, it’s not so much google doing subsidized pricing as its licensees. But a lot of those are pumping out increasingly more cost-effective models, and some of the first non-subsidized purchasers are going to be those Android or Apple toting consumers with a dead phone that isn’t under warranty. Right now, that should be a net win for Android. Once the iPhone 5 comes out, who knows?

Given the metro-wide Wi-Fi planned for the space between TV channels, an iPod Touch with upgraded Wi-Fi and a Skype app might do the trick.

I am reminded of when I used to write firmware for modems. I had a brain-dead scheduler with a very small number of priority levels. On the odd occasion that people would ask why the “OS” wasn’t any fancier, I would explain that a pure real-time system is not at all like a desktop. Everything has to get sufficient MIPs with low enough latency, or the connection fails.

In short, for hard realtime, if you have sufficient MIPs, you don’t need a very fancy scheduler. If you don’t have enough MIPs, the fancy scheduler isn’t going to do anything useful for you. It’s only in some very narrow range of “I just barely have enough MIPs, and this task can wait an extra five hundred microseconds to start every now again without a performance impact” where a fancy scheduler could possibly be useful. In other words, you’re right on the edge and you’re probably asking for weird irreproducible timing bugs.

Doing voice/video two-way communication over WiFi is going to be just like that. When there’s sufficient bandwidth, no real management is necessary. At those places and times where there is insufficient bandwith (especially almost sufficient bandwidth) people might start to realize the value-add of the carriers — once you start a voice call on a major network, it will usually give you reasonable quality for the duration of the call, even in a very congested setting.

> Doing voice/video two-way communication over WiFi is going to be just like that. When there’s sufficient bandwidth, no real management is necessary. At those places and times where there is insufficient bandwith (especially almost sufficient bandwidth) people might start to realize the value-add of the carriers — once you start a voice call on a major network, it will usually give you reasonable quality for the duration of the call, even in a very congested setting.

We need a way to reserve bandwidth with give backs. With a little delay, voice could then reserve it’s bandwidth and give back the silence.

We need a way to reserve bandwidth with give backs. With a little delay, voice could then reserve it’s bandwidth and give back the silence.

Sure, but that’s not an end-to-end negotiation. All of a sudden, the pipe’s not dumb any more, and all the bile and scorn heaped on the carriers is because they aren’t selling dumb pipes, and they need to get with the program and start selling dumb pipes.

Now the traditional way of handling this is that a node that knows it’s a potential chokepoint can do traffic shaping (possibly in cooperation with other nodes, but typically in such a fashion that the endpoints understand that there is a limited amount of bandwidth but haven’t specifically negotiated for it). But, depending on who owns that bandwidth-shaping node, the net neutrality contingent might get all bent out of shape when that happens.

> Sure, but that’s not an end-to-end negotiation. All of a sudden, the pipe’s not dumb any more, and all the bile and scorn heaped on the carriers is because they aren’t selling dumb pipes, and they need to get with the program and start selling dumb pipes.

They aren’t that much smarter. The key is that people will presumably have to pay for their reservations and be repaid at a slightly lesser rate for the give backs. I see no reason that people wouldn’t be willing to pay for quality voice, video and even quality data. I know I would. I would also, under some circumstances, be willing to allow quality to degrade to pay less.

> But, depending on who owns that bandwidth-shaping node, the net neutrality contingent might get all bent out of shape when that happens.

The net neutrality contingent bends me out of shape. There are clear advantages to being allowed to pay more for better quality. OTOH, if I and other carriers implemented Billable Reserveable Bandwidth Internet Protocol (BiRBIP) and we each allowed everyone to pay an equal price to reserve an equal amount of bandwidth, or to buy unreserved bandwidth by the bit, I would think the net neutrality contingent would have nothing to complain about.

But currently, the carriers already allow you to reserve voice bandwidth :-)

We were discussing disintermediating them with the wild west of whatever WiFi is available. There might not be any payment in some of those cases. You’d still need BirBIP, but since some of the providers would be free, there would be enormous incentive to game the system to run your massive torrents as if they were videoconferencing calls or something.

So basically, the people who are giving stuff away (free WiFi at Starbucks) are unlikely to invest in the technology, the people who are already managing to charge lots more for some bits than others (the carriers) are unlikely to invest in a technology that removes this competitive advantage by standardization, and the people who provide the all-you-can-eat buffets (but not you, Homer Simpson) (the cable and DSL companies) are unlikely to invest in the technology unless it dramatically increases their average price per bit, which isn’t going to happen in a world where most people can already run video conferencing over their home internet and will be pissed if they have to start paying extra for this privilege, thank you very much.

I’m sure I’m missing something, but I’m not seeing where the incentives are aligned well enough to make this protocol happen in a standardized format.

What I can see happening some time in the next couple of years is more useful traffic-shaping becoming a value-add (and then a checkbox item) in low-to-midrange WiFi routers (perhaps starting off in one of those dedicated Linux box setups), so that when you place a facetime call from an internet cafe, it will keep working even when somebody else starts up a torrent there. I’m sure this already exists; it’s just a matter of popularizing it.

> We were discussing disintermediating them with the wild west of whatever WiFi is available.

BiRBIP is an open specification. If Starbucks gets it’s internet from a carrier (which it does), then the carrier can require Starbucks to implement BiRBIP, and, even if Starbucks gives the unreserved bandwidth away, the carrier can sell reserved bandwidth to Starbucks patrons. In this way the carrier is both disintermediated and reintermediated at the same time, and since carriers could make money at it, we might actually see it implemented to benefit us all.

The ZTE one is on sale from Virgin Mobile, and as near as I can find, I don’t see anything about requiring a jail break to work. I can’t speak to the patent threat though.

I know the GSLO one requires a jailbreak, the articles talking about them trying to get “made for ipod” status make an issue of that fact. The ZTE one may work around this by using wireless hotspot tether. But “zte peel jailbreak” does give links saying that you need to jailbreak. So it’s difficult to say without more direct evidence.

Something i found while searching deeper for zte peel jailbreak, apparantly the battery life is 3 hours for a full charge on the ZTE one (the GSLO one adds a battery pack like every other network backpack i’ve heard of).

Sure. That’s something the cellphone companies and even the cable companies to some extent (with their built-in POTS adapter on the cable box) already count on.

> then the carrier can require Starbucks to implement BiRBIP,

I don’t think the lowest level bandwidth reservation is a huge technical problem. Might be a political problem, but even that could be overcome. The issue is at the next level up. I wouldn’t mind micropayments for placing a WiFi call from Starbucks or whereever, but if they all use different ISPs, how is the billing handled? There are possibly conflicting requirements, e.g. it needs to be seamless, transparent, and in the background; yet, if I was walking down the beach and inadvertently stumbled into the wifi RF field of a cruise ship that is charging international roaming rates, I would probably prefer to drop the call rather than pay $50.00/minute.

> There are possibly conflicting requirements, e.g. it needs to be seamless, transparent, and in the background; yet, if I was walking down the beach and inadvertently stumbled into the wifi RF field of a cruise ship that is charging international roaming rates, I would probably prefer to drop the call rather than pay $50.00/minute.

Yes. You would need to have a ‘top bid per minute’ built in, with a reasonably low default, and be prompted if you would exceed it – which is not much different from roaming today.